Importing goods into the EU

Prepare your business for the new VAT rules

What you need to know about the new VAT e-commerce rules

A closer look at the new European VAT e-commerce rules

On the 1st of July 2021, the European Union will update its value added tax (VAT) system for goods imported from outside the EU. The intention is to simplify and standardise the taxation of cross-border supplies of goods and services. This page gives you a detailed overview of the impact for e-commerce businesses and online marketplaces.

What is new?

The new rules are intended to combat fraud and to provide a fairer and more transparent tax system.

  • New VAT rules

As of the 1st of July 2021, goods valued at €22 or less that are imported into the EU will no longer benefit from exemption from VAT. This means that as of this date, all goods will be taxed, regardless of their commercial value. Above the €150 threshold, international customers are still obliged to pay customs duties upon importation into the EU. The VAT rate is the one applicable in the customer’s EU member state.

This is how the current and new situation looks from the buyer’s point of view:

  • The Import One-Stop Shop (IOSS)

To ensure a smooth transition to the new VAT system, the EU has created the Import One-Stop Shop (IOSS). The IOSS is the electronic portal businesses can use from the 1st of July 2021 to comply with their VAT e-commerce obligations on distance sales of imported goods.

IOSS can only be used if:

  • You are an online seller or electronic interface (online marketplace, platform etc.)
  • The imported goods are worth €150 or less
  • The imported goods are dispatched from outside the EU at the time of sale
  • The imported goods are not subject to excise duties (excise duties are indirect taxes on the sale or use of specific products, such as alcohol, tobacco and energy)

Why use IOSS?

The IOSS saves you and your customers headaches by providing standardised and simplified VAT solutions. You can offer your customers a transparent and hassle-free shopping experience by taking care of all the VAT declarations and payments for cross-border transactions.

In practice: how it works

Imagine you’re importing a €10 smartphone case to Europe. Currently, there is no need to pay any customs fees or taxes, so the customer would still only pay €10. As of the 1st of July 2021, the same smartphone case arriving in Belgium, for example, will be subject to a customs fee of €15. 21% VAT will then be surcharged on the total amount (€5.25). VAT rates and customs fees vary depending on the destination country.

In this case, the customer will be charged €30.25 for the same smartphone case. If you are an IOSS supplier, however, your customer will only have to pay the VAT surcharge. (21% VAT on €10, i.e. €2.10)

The benefits for you as a retailer

  • Centralised customs clearance

After the 1st of July 2021, there will no longer be a central clearance option for non-IOSS sellers. The VAT rate is the one applicable in the customer’s EU member state and you will be obliged to arrange direct transport to each individual EU country.

  • Reduced administrative overheads

Once your business is registered as an IOSS seller in one EU member state, you can use this registration to do business in the entire EU. The VAT return and payment is due in the country of registration.

  • Reduced customs clearance times

Goods imported by an IOSS seller will only be checked for a valid IOSS number before being dispatched to the customer. Goods sold through unregistered businesses can only be cleared after VAT has been collected.

The benefits for your customers

  • No additional taxes and customs fees

Customers avoid paying additional taxes and customs fees and will greatly appreciate this transparency. As a result, IOSS webshops can advertise products at the total price (including VAT).

  • Hassle-free transactions

For IOSS transactions, customers will not have to go through another procedure to pay the VAT or customs clearance fees when their goods enter the EU.

  • Faster delivery

IOSS-registered goods will speed through customs thanks to the standardised system. Customers who shop through a non-registered supplier will lose a lot of time trying to get their shipments past the border.

How to get off to a flying start?

This is what you need to do to prepare your shop or electronic interface to use the IOSS.

  • Step 1: Register your business

You can register your business on the IOSS portal of any EU member state. Select the IOSS portal for the EU member state of your choice and follow the registration process. If the EU member state of your choice is not available in the linked document, do not hesitate to reach out to your local Landmark Global Account Manager for help.

Not based in the EU? First appoint an EU-established intermediary
If your business is not based in the EU but you still want to enjoy the IOSS benefits, you will be required to appoint an intermediary (a taxable person based in the EU to act on your behalf). The intermediary fulfils your VAT obligations on your behalf using a specific VAT identification number for your business transactions. They will file a monthly VAT return and pay the corresponding amount to the tax authorities of the member state they are based in.

  • Step 2: Prepare your sales and shipping processes

If you are to use the IOSS, your webshop must fulfil certain requirements. For example, the amount of VAT to be paid must be advertised during the buying process. There is also an impact on the shipping process. Labelling needs to be adapted to the IOSS provisions, shipments must be provided with a 6-digit HS code describing the type of goods contained within, etc. It is important to prepare your sales and shipping processes in time for all these changes.

  • Step 3: Inform your customers

Convenience is key: customers are bound to opt for the easiest, fastest and cheapest solution. So make sure they understand you use the Import One-Stop Shop. That way, they know exactly how much they are paying and what is expected from them. There is full transparency and no hidden surprises.

Not sure how to get started? Read our guide for more detailed information and to get up to speed!

Looking for more info or support?

Do not hesitate to contact your local Account Manager